Bressler Risk Blog

“Accountants Owning Law Firms?” —

• “In a novel move, Big 4 accounting firm KPMG has taken the first step in seeking to own and operate a law firm in the United States. Although permitted in other countries, the United States generally prohibits non-lawyers from owning a law firm. In 2020, however, Arizona became the first state to relax that standard thereby opening the possibility of what is apparently on the horizon. “
• “There are about 1.3 million attorneys in the United States. Competition is considerable, and attorneys strive to develop a brand, a client base, and some way to set ourselves apart from the rest of the pack. Traditionally that ‘pack’ has exclusively consisted of other members of the bar who have met specific requirements necessary to practice law due to the Rules of Professional Conduct governing attorneys. Those rules prohibit non-lawyers from owning U.S. law firms due to ethical concerns governing conflict of interest principles. (See, e.g. ABA Model Rule 5.4.) However, jurisdictions including Arizona and others have recently enacted reforms which would permit non-lawyer ownership under specific conditions. “
• “Critics may worry that allowing non-lawyers to own law firms could lead to conflicts of interest and compromise the quality of legal advice. On the other hand, those in favor of the change may argue that ownership by non-attorneys could improve access to justice through novel, innovative business structures which potentially could reduce costs. This development is certainly worth monitoring.”

Law.com editor Dan Packel writes: “The Law Firm Disrupted: With KPMG’s Proposed Entry, Arizona’s Liberalized Legal Market is Getting Interesting” —

• “In late 2018, I dug into the idea that the Big Four firms, which had already building up their capabilities in legal services outside the U.S., posed a threat to American law firms that few were taking seriously. And in early 2020, my former colleague Dylan Jackson and I took a close look at how a push to reform the way the U.S. legal system is regulated, particularly for the sake of improving how average Americans can access legal services, could impact Big Law.”
• “Now that KPMG appears poised to take advantage of perhaps the most significant reform effort to date, it’s a good time to go back to previous reporting and see what’s actually transpired since then.”
• “Needless to say, some of the most dire predictions—at least from the perspective of Big Law—have yet to manifest themselves. Take the Big Four. One young fund formation partner at a global law firm shared his fears that, by 2024, the accounting firms would have muscled into his territory with ease.”
• “‘What I’m now doing, I won’t be doing. The classic fund formation group of a firm with 10 people won’t exist,’ he said in 2018. ‘I am fully prepared that they will be a competitor, and they will crush me if they wish.’ But Big Law funds formation work remains healthy—the Big Four has not vacuumed up this work. (To reinforce this point, I just flipped over to my email to find a press release with a global law firm announcing the hire of a new funds formation partner.)”
• “One big takeaway from my reporting in 2018 was that if they wanted to muscle in on some of the more sophisticated work that U.S. law firms do—not just funds work, but M&A advisory services—they could potentially pull it off, regardless of what state bar rules had to say about their ownership structure and the unauthorized provision of legal services.”
• “That’s because the definition of ‘legal services’ gives way to a gray area, I learned from former Arnold & Porter managing partner James Jones, who I was sad to hear died recently. Jones said that these Big Four firms could make a credible case that the work they aspired to do didn’t qualify as the practice of law, and he and others also emphasized that these firms’ deep pockets could give them the resources to win a legal fight, if it came to that.”
• “Until now, these firms have been content with indirect strategies for accessing the U.S. legal market, like formal alliances with U.S. law firms. And while the proposed move by EY to spin off its global audit business could have created a standalone advisory shop that would no longer have been constrained by ethical boundaries precluding that firm from providing legal services to audit clients, a revolt by U.S. leaders stopped that plan in its tracks. Over $100 million spent on the proposed split went down the drain, according to the Wall Street Journal. The firms have also faced a global scandal over employees cheating on ethics exams.”
• “Arizona’s move to abolish Rule 5.4, which barred non-lawyer ownership of law firms, and the state’s move to create ABS licenses has had a clear impact, allowing local firms to shake up how they’re organized and attracting some of the more cutting-edge legal businesses to the state.”
• “‘Lawyers also argue that the global dominance of the accounting profession by a very small number of accounting firms is an anticompetitive model that should not be replicated in the legal profession,’ the firms, including Morrison & Foerster, Pillsbury Winthrop Shaw Pittman and Baker McKenzie, wrote.”
• “But now that the Arizona program has established its viability, with over 100 licensees, at least one Big Four firm sees an open door to offering its technological capabilities and scale to help U.S. clients serve some of their legal challenges. It’s only fair to assume the others will follow.”

“UK Funder Joins With Law Firm, Insurer to Form Legal Behemoth” —

• “A litigation funder is forming a novel company designed to oversee cases from inception to resolution.”
• “UK-based Asertis is now the funding arm of newly formed Legatus Holdings Limited, which includes other subsidiaries KP Law, an insurance managing general agent, and a mass tort and group action claim acquisition company.”
• “The new venture aims to put under one roof two mainstays of the litigation funding ecosystem: investments in mass torts claims and insurance offerings for parties in lawsuits. It highlights the opportunities for funders in the UK and other places where restrictions on law firm ownership have been relaxed.”
• “‘There’s nothing in the UK that mirrors this, that has those four subsidiaries vertically integrated into legal assets,’ said Legatus chief executive officer Philip Holden. ‘We have created a unique and compelling vertically integrated group, where each operating business is led by market-leading professionals with established pedigrees in their respective fields,’ said Holden, who formerly served as Asertis general counsel, in a statement.”
• “The new venture streamlines litigation finance, according to Holden. Instead of outsourcing for claim aggregation or insurance to cover adverse costs, it will all happen in one place. The companies are not required to only work within Legatus and can work with the rest of the market.”
• “The law firm subsidiary KP Law is the result of a 2024 merger between the UK divisions of two massive US mass tort firms: Keller Postman and Lanier, Logstaff, Hedar & Roberts. Asertis bought Keller Postman UK in 2023 and acquired Lanier Longstaff the following year. Lanier’s docket includes both the UK and European claims in the talcum powder litigation against Johnson & Johnson. It cut ties with both Keller Postman and Lanier in the US after the purchase.”
• “These kinds of arrangements—often referred to as ‘alternative business structures’—are far less common in the US, where most states ban nonlawyers from having ownership interests in law firms. Arizona, Utah, and Washington, DC are among the jurisdictions that have loosened the restrictions to varying degrees.”
• “Stephen Mayson, a professor of law at University College London and a chair of an ABS in the UK, says a structure like this has been a long time coming and the original intention of the ABS provision was to encourage multidisciplinary businesses. But combining businesses that are all regulated differently could present difficulties.”
• “‘Putting this together under one umbrella looks great from a multidisciplinary perspective,’ said Mayson. ‘This will be enormously complex from a regulatory perspective.'”
• “He added that this could influence how the US looks at nonlawyer ownership, ‘If this sort of thing happens in a crossborder situation there might be more pressure on US regulators to look closely to how they do this.'”

“M&A Service Providers, M&A” —

• “Private equity has discovered the accounting space— and it can’t get enough. ‘There’s an M&A frenzy right now,’ says Allan Koltin, CEO of Koltin Consulting Group. If all goes according to plan, private equity firms may soon own a third of the 30 biggest accounting firms in the United States, according to projections from The Financial Times.”
• “TowerBrook Capital Partners’ 2021 investment in accounting firm EisnerAmper was the first private equity deal in the indus- try. Since then, there’s been a flurry of activity in the space— with private equity investing in firms like Citrin Cooperman,
• “Grant Thornton, Cherry Bekaert and Baker Tilly, as well as mergers of firms such as BKD and Dixon Hughes Goodman.”
  Private equity is attracted to these firms for straightforward reasons. Accounting firms are sticky businesses, with loyal client bases and stable recurring revenue streams. They’re low-risk and largely recession-proof. ‘People don’t switch their tax provider. And in a good or bad economy, you still need to file taxes and get audits done,’ says Andre Moura, managing director at New Mountain Capital, which invested in Citrin Cooperman in 2022 and Grant Thornton in 2024.”
• “Furthermore, the industry is still highly fragmented. There are over 80,000 accounting firms in the United States, according to IBISWorld data, and as of 2020, nearly three-quarters of the CPA workforce had met the retirement age, according to the American Institute of Certified Public Accountants (AICPA).”
• “Confronting Conflicts of Interest. Independence is one of the main pillars of the accounting industry, meaning an auditor must have no ties to or conflicts of interest with the company it is auditing.”
• Regulations also stipulate that CPAs must hold a majority ownership stake in audit practices. To comply, accounting firms taking on private equity investment must adopt an alternative practice structure, splitting the practice into two parts: an audit and attestation unit, owned by CPAs, and a non-attest unit (e.g., tax and consulting), which can be partially owned by outside investors.”
• The concept of independence still applies. But many worry the presence of an outside investor inevitably introduces complications. ‘The private equity firm that owns part of the business already has its own other portfolio companies. The accounting firm now must be independent not only of its own clients but also of the private equity firm and quite possibly of all the portfolio companies of the private equity partner. The private equity firm needs to share in this responsibility as well,’ says Jey Purushotham, practice group leader of compliance solutions at Intapp.”
• Regulators like the AICPA and the Public Company Accounting Oversight Board (PCAOB) have taken note of the shift in the industry and are keeping a close eye on this dynamic.”
• Accounting firms can stay compliant by communicating frequently with the investor to stay updated on its portfolio companies and ensure no conflicts of interest or independence impairments arise. But some find it hard to believe that an accounting firm’s audit practice can truly maintain professional independence within such”
  a structure. “
• Furthermore, some fear private equity doesn’t understand the gravity of the professional independence standards. ‘The ramifications are very black and white. You cannot have even one potential independence impairment that you have failed to eliminate when required, or that you have not safeguarded or reduced to an acceptable level when allowed—and if you do have an independence impairment with a publicly traded company, the consequences can be very high,’ says Purushotham.”

“Ont. Superior Court orders estate’s lawyer to withdraw over conflict of interest in fraud case” —

• “In a dispute over alleged fraudulent conveyance, the Ontario Superior Court of Justice ordered the estate’s lawyer to step down due to a potential conflict of interest.”
• “The case stemmed from a 2010 incident in which a married couple allegedly attempted to commit fraud in a loan application to the Royal Bank of Canada. Authorities laid criminal charges but later stayed them. In 2012, one of the applicants filed a lawsuit seeking damages for negligence, malicious prosecution, and related claims.”
• “After years of litigation delays, the court dismissed the original claim in 2023 and awarded significant costs against the estate of one of the original plaintiffs, who had passed away in 2021. During this period, the estate transferred property to its sole beneficiary, prompting the bank to file a new legal action alleging the transfer was fraudulent and aimed at avoiding payment of the outstanding cost awards.”
• “The estate and its representative filed a counterclaim alleging defamation and discrimination by the financial institution and its legal counsel.”
• “The Superior Court ordered the estate’s lawyer, Peter Callahan, removed as counsel, citing his potential role as a necessary witness. Key evidence in the case revolved around whether Callahan communicated court orders regarding cost payments to the estate’s representative before the disputed property transfer.”
• “The court determined that Callahan’s involvement in these communications created a conflict of interest. It also noted that his continued representation could compromise the fairness of the proceedings, as he might be required to cross-examine witnesses or address matters in which he had direct knowledge.”
• “In its decision, the court noted that the threshold for removing counsel is exceptionally high, and it should grant such motions only in rare circumstances. While the court acknowledged the inconvenience and expense its decision may cause, it concluded that removing Callahan was essential to ensure the proper administration of justice.”

Massachusetts: “Evidence – Peer review privilege – Bias” —

• “Where the peer review privilege was found to apply to the termination of a plaintiff’s privileges in 2021, the plaintiff’s motion for reconsideration should be denied because he has not presented evidence of an actual conflict of interest.”
• “‘As explained in my prior ruling, there is a ‘single, narrow exception to the peer review privilege,’ which applies when ‘a member of a peer review committee did not act ‘in good faith and in the reasonable belief that based on all of the facts the action or inaction on his part was warranted’ during the peer review process.’ …”
• “‘I previously concluded the privilege properly applied to the termination of Holick’s privileges in 2021 (2020-2021 Proceedings). In the instant motion, Holick asserts that discovery has revealed that Dr. Pierre Cremieux (Cremieux), the President of Analysis Group, who chaired the Ad Hoc Committee (AHC) of the Board of Trustees, was biased against Holick. The AHC reversed the Medical Executive Committee’s (MEC) decision and recommended that the Board terminate Holick’s privileges, which recommendation the Board adopted…”
• “‘Holick argues that the evidence shows ‘that Dr. Cremieux was chosen to chair the Board ad hoc committee precisely because of his view against Dr. Holick, and in discharging his role, did not bother with even a pretense of objectivity or fidelity to the rules.’ I am not persuaded.”
• “‘The 2020-2021 Proceedings were initiated because Holick agreed to certain restrictions and failed to comply with them. Although it is mildly disturbing that Cremieux was not able to describe the AHC’s standard of review, and it would have been preferable for the AHC to have been chaired by someone who had not previously expressed concern about Holick (albeit more than two years before), this evidence, alone or in combination with other evidence, is not sufficient to demonstrate the requisite bad faith. This is particularly true given that: (1) Cremieux’s views in 2018 were expressed in connection with the negative press coverage Holick was receiving at the time and the reputational harm BMC could suffer as a result; (2) Cremieux testified that ‘none of the emails’ he sent in summer 2018 suggested that he had concluded that BMC should fire or cease association with Holick at that time but were about ‘strategizing’ actions in response to the bad press; and (3) Cremieux’s deposition statements were not entirely inconsistent with the standard of review the Board AHC was required to apply. Put elsewise, Holick has not presented evidence of an actual conflict of interest that interfered with the actual operation of the AHC.”
• “‘The evidence is not irrelevant to the issues in the case. It simply does not rise to the level necessary to invade the medical peer review privilege.'”
• See: full text of the opinion.

“Ethics Disclosure Fail Sinks Firm’s Coverage, NJ Panel Says” —

• “A law firm that failed to reveal an attorney’s ethics case when applying for malpractice insurance coverage effectively secured the policy using misrepresentations, the New Jersey state appeals court ruled, declining to revive the firm’s suit over the rescission of its policy.”
• “The two-judge appellate panel upheld on Friday the 2022 ruling of Superior Court Judge Owen C. McCarthy that Allied World Insurance Co. was right to rescind policies issued to Schibell & Mennie LLC because firm partner Richard D. Schibell made a ‘material misrepresentation’ on coverage applications when he failed to disclose an ethics case against him.”
• “‘An insurer may consider a policy void as of its inception when it discovers the insured has made material misrepresentation, upon which it reasonably relied in issuing the policy,’ the appellate panel said.”
• “In 2013, the state’s Office of Attorney Ethics filed a disciplinary complaint against Schibell. Nearly four years later, the state Supreme Court accepted the Disciplinary Review Board’s recommendation for a censure.”
• “The review board found Schibell had commingled personal funds with client funds and had provided falsified documents to the Office of Attorney Ethics.”
• “In 2016, Schibell & Mennie did not reveal the OAE complaint when it filled out the Allied World application, according to court documents.”
• “For one question — ‘Has any attorney been the subject of any bar complaint, investigation or disciplinary proceeding within the past five years?’ — the firm answered no, court documents said. The firm answered no to similar questions on applications over the next three years.”
• “In 2017, the estate of deceased firm partner Mark D. Kentos launched a complaint against the firm and Schibell over life insurance policy proceeds. After a legal malpractice claim was added to that case in August 2019, Allied World conditionally agreed to cover the matter, according to court documents.”
• “About two months later, however, Allied World rescinded the policies after the company said it determined that the firm made misrepresentations in its applications by not disclosing the disciplinary action against Schibell.”
• “In fighting the insurer’s summary judgment bid, the firm argued that its responses to the application questions were accurate, since Schibell’s ethics case did not meet the definition of a ‘disciplinary proceeding’ under the policies, which refers to a proceeding ‘alleging professional misconduct in the performance of or failure to perform legal services,’ court documents state.”
  “But Judge McCarthy rejected that argument, saying, ‘This strained and overly narrow construction is an attempt to find and/or create coverage where none exists.'”

“Prominent Bay Area lawyer skewers Mark Zuckerberg, fires Meta as a client” —

• “For most people angry at Meta or Mark Zuckerberg, the options for recourse are limited. You could delete your Facebook account or complain about the billionaire with like-minded friends. But Bay Area lawyer Mark Lemley has taken a far more noticeable approach: He fired the company as a client.”
• “Lemley, a prominent intellectual property attorney and professor at Stanford Law School, was one of a gaggle of lawyers representing Meta in a legal battle over the tech giant’s alleged use of copyright texts for training artificial intelligence. It’s a high-profile case, pitting Sarah Silverman, Ta-Nehisi Coates and other authors against one of the world’s largest companies, and has the potential to create formative case law. But Lemley was too displeased with his client to continue.”
• “On Monday, the lawyer withdrew from the case and Meta’s roster, according to a docket entry. Lemley explained his reasoning with a thread on Bluesky, writing that he has ‘struggled with how to respond to Mark Zuckerberg and Facebook’s descent into toxic masculinity and Neo-Nazi madness.’ (More context on those roasts in a moment.)”
• “Then came the hammer. ‘I have fired Meta as a client,’ Lemley wrote. ‘While I think they are on the right side in the generative AI copyright dispute in which I represented them, and I hope they win, I cannot in good conscience serve as their lawyer any longer.'”
• “SFGATE reached Lemley over email and asked what specifically prompted his decision to sever most of his Meta strings. The lawyer referenced changes to the company’s content moderation system — as of last week, Meta specifically allows ‘allegations of mental illness or abnormality when based on gender or sexual orientation’ in posts. Axios also reported Friday that Meta was ending major diversity, equity and inclusion programs. The overhauls appear aimed in part at currying the favor of President-elect Donald Trump in the run-up to his inauguration; Zuckerberg is also scheduled to co-host a reception before the inaugural ball, Puck News reported.”
• “Meta’s CEO provoked more ire still with comments on a new episode of Joe Rogan’s podcast released Friday, complaining that corporate culture is getting away from ‘masculine energy.’ Lemley referenced that statement in a Sunday post, writing ‘Oh yeah, that’s the problem with tech companies — not enough testosterone,’ alongside an eye-roll emoji. (In 2023, Meta’s workforce was 64.2% male and 35.8% female, the company reported.)”
• “‘I decided that I could not in good conscience be associated with a company that made those decisions, so I decided to withdraw,’ he wrote. ‘Meta remains represented by outstanding counsel in this case, and I believe they should and will prevail in the case. But they will have to do it without me.'”
• “Lemley had been working on the copyright case since 2023, via the firm Lex Lumina, and his name appears in more than 100 docket entries. The tech giant still has legal firms Cooley and Cleary Gottlieb Steen & Hamilton on the case.”

“Western NY Justice Agrees to Public Admonishment Over ‘Obvious’ Conflict of Interest” —

• “A part-time justice in western New York agreed that he should be admonished for trying to have a small-claims matter against him delayed, to give him time to convince his former legal client to withdraw the pleading, the state’s judicial watchdog said on Wednesday.”
• “Alden Town and Village Courts Justice Michael W. Cole had been hired as an attorney in 2018 and paid a $1,500 retainer by a client with a family law matter, but the following year, she became dissatisfied with his representation and made several requests for return of the money, the New York State Commission on Judicial Conduct said in a statement.”
• “In 2021, the ex-client filed a small-claims case against Cole, in his own court. Rather than have the case transferred to another court, the commission said Cole asked his clerk to delay processing the claim as he tried to get her to withdraw it—an ‘obvious’ conflict of interest.”
• “The matter was later transferred, and Cole returned her money in full, the commission said.”
• “‘Instead of promptly disqualifying himself from the action filed against him in the court where he presides,’ the commission’s 11-0 determination read, Cole ‘improperly influenced court staff and delayed the processing of the claim. In this way, respondent violated well-established ethical standards and used his judicial status for his personal benefit.'”
• “Commission Administrator Robert H. Tembeckjian said: ‘Public confidence in the integrity of the legal system is undermined when a judge who is sued exerts the influence of judicial office to delay processing of the claim. To his credit, Judge Cole accepted responsibility for his conduct, resolved the lawsuit and cooperated with the Commission.'”

“Kirkland Partner Said Romance ‘Tarnishes’ Ex-Judge’s Cases” —

• “A top restructuring attorney for powerhouse law firm Kirkland & Ellis LLP told government attorneys that a relationship between an ex-judge and a former bankruptcy partner for Jackson Walker LLP should have been disclosed.”
• “Kirkland’s Joshua Sussberg also said during a September deposition, the transcript of which was obtained by Bloomberg Law, that he thought former Houston bankruptcy judge David R. Jones experienced a ‘lapse in judgment’ related to his previously undisclosed relationship with Jackson Walker attorney Elizabeth Freeman.”
• “Kirkland often teamed up with Jackson Walker as local counsel to bring large, complex Chapter 11 cases to the Southern District of Texas bankruptcy court, which became a favored venue for Kirkland during Jones’ tenure.”
• “The deposition was taken as part of a lawsuit in which the government has accused Jackson Walker of breaching its ethical duties, a charge the firm rejects. Government attorneys, noting that Jones and Freeman owned a home together, argue the relationship should’ve been disclosed.”
• “‘To the extent that we were aware of an actual financial relationship, I can’t tell you exactly what it was we would have done, but we absolutely would’ve made certain that that was out in the open for fear of disrupting an existing case or go forward cases,’ Sussberg said.”
• “Comments by Sussberg, one of the most high-profile attorneys in the US for large corporate bankruptcies at the world’s largest firm by revenue, could become salient in efforts by the Justice Department’s bankruptcy watchdog to disgorge as much as $23 million in fees Jackson Walker collected in cases involving Jones while it employed Freeman.”
• “A trial set for April will determine whether orders awarding fees to Jackson Walker should be vacated and whether the firm can be sanctioned.”
• “Jones resigned soon after the relationship became public in late 2023 but the scandal has spurred several legal actions. Freeman left Jackson Walker in December 2022.”
• “During his deposition, Sussberg said if Kirkland knew of the relationship, it likely would have taken action to ensure it was ‘public,’ noting that Kirkland has a ‘reputation and a brand that it’s protecting.'”
• “Sussberg was asked by a government attorney whether he understood that due to the potential conflicts, orders issued by Jones may be voidable, and that it posed harm to clients.”
• “‘There’s all sorts of different legal rules, regulations, and ability to challenge, and remedies and the like, but I would absolutely say that I do believe it tarnishes all these cases,’ Sussberg responded. ‘And that’s a great concern from our perspective.'”
  “While bankruptcy rules may not technically require the disclosure of relationships with judges, Kirkland errs on the side of caution, Sussberg said. If there’s a question about whether something should be disclosed, it does so, he added.”
• “To the extent Jackson Walker was aware of a romantic relationship, Sussberg said its attorneys were duty-bound to disclose it to Kirkland so it wouldn’t ‘infect and absolutely disrupt a pending case where we had no knowledge otherwise.'”
• “Kirkland has previously said it abided by its ethical responsibilities and made accurate representations to the court, including all required disclosures.”

“Fox Rothschild Atty Beats Trade Secret Theft Allegations” —

• “A federal judge in New Jersey says a company trying to develop cancer drugs had waited too long to sue its former patent lawyer after he allegedly ‘confessed’ over five years ago to helping a Chinese rival file a patent application that allegedly misappropriated trade secrets.”
• “U.S. District Judge Edward Kiel had bad news for Princeton-based Beta Pharma, which filed suit in late 2023 against Fox Rothschild patent lawyer Wansheng Jerry Liu, who is currently chair of the firm’s China practice, according to his LinkedIn page. Beta says it retained Liu and his firm in 2012 to file a patent application, but that Liu ended up disclosing ‘highly confidential details’ to a rival drug developer in China, InventisBio.”
• “Both companies are clinical drug developers in the cancer research space and have yet to put any major drugs on the marketplace. Nevertheless, Beta was too late to sue over any of that now, even if these allegations were true, wrote Judge Kiel on Tuesday.”
• “Liu allegedly ‘confessed’ to this back in 2019. ‘Beta Pharma should ‘have been on notice of the alleged misappropriation’ before October 11, 2020,’ wrote Judge Kiel.”
• “According to the complaint, Liu had lunch with Beta Pharma founder Don Zhang in 2019 and ‘admitted … both that he had a connection with InventisBio, saying in a conversation, ‘I know [InventisBio co-founder Zhiqin Jiang],’ ‘He’s my friend’ and ‘I helped him file the application.””
• “‘Liu’s confession to Dr. Zhang was on January 15, 2019, which is 20 months and 27 days before the latest accrual date of the statute of limitations of October 11, 2020,’ wrote Judge Kiel. The ruling did not weigh in on the merit of Beta’s case against Liu.”
• “Lawyers for Fox Rothschild and InventisBio declined to comment on the ruling. Representatives for Beta Pharma did not return a request for comment.”
• “In the filings, lawyers for Liu and his firm say that their former client ‘pleads no motive for Mr. Liu to undertake this career-ending conduct’ and call his alleged confession both ‘highly suspect’ and ‘uncorroborated.'”
• “‘Liu has now been sued on the same claims in three separate lawsuits in two different venues since 2020. The prior two cases, of course, ended when Beta Pharma — faced with an obligation to put up or shut up — chose the latter course,’ according to Liu and the firm in the filings.”
• “InventisBio, represented by a different legal team, says Beta Pharma had been on notice in the case as far back as 2016, ‘because that is when it alleges a copy of its alleged crown-jewel trade secret was published by its direct competitor.'”

Some recent spots from Bill Freivogel:

• Abreu v. Alvarez, No. 21 Civ. 1641 (RER)(VMS) (E.D.N.Y. Dec. 31, 2024).
  • “This opinion by the magistrate judge involves Law Firm No. 1’s attempt to represent Driver and two Passengers against the other vehicle’s driver. Defendants filed a counterclaim against Driver. Law Firm No. 2 began defending Driver as counterclaim defendant. Passengers then retained Law Firm No. 3 to represent Passengers as plaintiffs. Law Firm No. 1 continued to represent only Driver and only as plaintiff.”
  • “Passengers had, at the outset, signed waivers of Law Firm 1’s conflict. Nevertheless, the magistrate ordered that Law Firm No. 1 be disqualified from representing Driver as plaintiff, as well as Passengers.”
  • “The analysis is complicated by Defendants’ claiming that Plaintiffs ‘staged’ the accident. The opinion appears to be a pretty good review of New York state and federal court results in driver/passenger situations (there are a lot of them). Compare this result with the very recent Arcos v. Vee Bee Cooling Corp., No. 522644/2022 (N.Y. S. Ct. Kings County Nov. 25, 2024). There, the court denied a motion to disqualify the lawyer for the driver and passenger because the parties had signed waivers.”
• S.E.C v. Thurlow, 2024 WL 5245008 (S.D.N.Y. Dec. 30, 2024).
  • “The S.E.C. sued a number of defendants who were involved in a scheme to set up a “shell company” for the purpose of fraudulently issuing debt, converting the debt to equity, and selling the equity shares without registering them. Lawyer, one of the defendants, is alleged to have been directly involved in many of these transactions. Lawyer appeared for himself and three other defendants.”
  • “The court, sua sponte, raised the specter of Lawyer’s conflict of interest. In response, the parties submitted letters discussing the conflict, and Lawyer submitted conflict waivers from his other clients. In this opinion the court disqualified Lawyer from representing his other clients. The court said given the obviousness of Lawyer’s conflict under Rule 1.7, the court did not have to address Rule 3.7 issues.”
• Savett v. SP Plus Corp., 2024 IL App (1st) 230931-U (Ill. App. Dec. 26, 2024).
  • “The trial court certified the class. In this opinion the appellate court affirmed. One objection was that Class Counsel had participated with Class Rep No. 1 as both class counsel and class representative in a “significant number of cases, switching roles back-and-forth.” Another objection was that Class Counsel and Class Rep. No. 2 were friends and their children went to the same school. The appellate court rejected both objections.”

“Venable Faces DQ Bid In AmeriMark Shareholder Dispute” —

• “Attorneys from Venable LLP and Parsons Behle & Latimer PC have been hit with a disqualification bid in Utah federal court in a shareholder dispute involving AmeriMark Group AG, with the defendants arguing the lawyers are representing both the suing shareholder and the AmeriMark subsidiary at the heart of the dispute, causing a conflict of interest.”
• “Defendants Rymark Inc. and Nicholas Thayne Markosian filed a disqualification motion on Thursday against the attorneys representing the suit’s plaintiffs, Capana Swiss Advisors AG and AmeriMark Automotive AG.”
• “According to the motion, the lawsuit boils down to a dispute over who controls AmeriMark Group and AmeriMark Automotive. Capana claims it has about 13 million shares in AmeriMark Group, or a 65% stake, but Markosian alleges in a countersuit that those 13 million shares were stolen from him and that he is, in fact, the largest shareholder in the company.”
• “Now, Markosian and Rymark claim that the same attorneys are representing AmeriMark, Capana and several executives of both companies, causing a conflict of interest.”
• “‘In the ordinary course, AmeriMark would be agnostic as to the dispute between Capana and Mr. Markosian over the 13,000,000 shares. And the evidence of the theft is so overwhelming that AmeriMark would almost certainly be advised by independent counsel to credit Mr. Markosian’s claims,’ the motion said.”
• “‘But in this litigation, AmeriMark is represented by the same attorneys representing Capana,’ the motion said. ‘Those attorneys are being paid by Capana, not AmeriMark. The upshot is that AmeriMark is essentially at the mercy of Capana and Capana’s attorneys. It is not receiving independent or unbiased legal advice.'”
• “The defendants argued that Capana and its owner, Shaen Bernhardt, are the ones ‘calling the shots’ in the suit and that Capana is paying AmeriMark Automotive’s counsel fees because the AmeriMark companies have no money and are essentially empty shells.”
• “They argued that such dual representation violates two Utah Rules of Professional Conduct. The first, Rule 1.7, prohibits concurrent conflicts of interest. The second, Rule 1.8(f), prohibits an attorney from receiving ‘compensation for representing a client from one other than a client’ without the client’s consent or when doing so will ‘interfere[] with the lawyer’s independence of professional judgment,’ according to the motion.”
• “Markosian and Rymark said that Venable and Parsons Behle could not have obtained informed consent from AmeriMark to receive legal fee payment from Capana because the control of AmeriMark is disputed.”
• “And even if the firms did go through the process of obtaining consent and the consent were legitimate, it ‘would still not cleanse the financing arrangement here, since the conflict and payment terms threaten to ‘interfere’ with those firms’ ‘independence of professional judgment [and] with the client-lawyer relationship,” the motion said.”
• “‘This is not meant as an insult to specific attorneys. It is simply an acknowledgment of the practical realities present when a lawyer represents two entities with divergent interests and only one of the entities is paying,’ the motion said. ‘Attorneys who are being paid by Capana to represent AmeriMark just cannot be expected to see clearly when — for instance — incontrovertible evidence comes to light showing that Capana’s stake in AmeriMark Group was stolen.'”
• “John Worden of Venable LLP: ‘This case has been pending for 18 months, and they brought this [motion] at the close of discovery and it is obviously just to postpone the trial date. They could have brought this months ago and instead sat on it through series of depositions.'”

“Liveness detection IP court battle between Jumio and FaceTec turns nasty” —

• “A legal dispute between face biometrics and liveness detection providers is turning nasty, with accusations of bad-faith dealing and dishonesty leveled in U.S. federal court. Legal representatives for Jumio accuse FaceTec of mischaracterizing the prior work of a law firm that used to represent the latter, and now the former, in a motion countering FaceTec’s move to have the firm removed from the dispute over an alleged conflict of interest.”
• “Jumio’s representatives at Perkins Coie LLP say that FaceTec is merely attempting to smear the reputation of its litigation opponents, they say, citing the five months and 2,000 hours of work the law firm had spent defending the Palo Alto-based identity verification company before FaceTec filed its motion to remove it in December.”
• “Jumio’s opposing motion in the Northern District of California denies the substance of FaceTec’s motion to remove, and accuses its competitor of expressing manufactured confidentiality concerns with ‘tactical timing.'”
• “The law firm does not dispute that it worked with FaceTec, but argues that the billable hours reflect a relationship different and far shorter in duration than the 3D liveness provider indicated in its motion.”
• “Perkins Coie argues on Jumio’s behalf that it did not work on the patents in question, contrary to FaceTec’s claim, and what work it did for FaceTec did not involve any confidential information material to the case. The motion says that another firm, Weide & Miller, did most of the work on FaceTec’s patents, and Perkins Coie did only a tiny amount of work on patent applications for the company, all prior to 2016. It claims it did not work on patents involving the comparison of two pictures, and that no attorney that worked on other FaceTec patents remains with the firm.”
• “Perkins’ prior work for FaceTec ‘was not substantially related’ to the IP dispute, and the firm’s partner Lowell Ness was only an ‘occasional’ representative of FaceTec, according to the motion. Ness’ role as secretary for FaceTec at its founding was ‘customary’ and does not meet the criteria for disqualification, and the plaintiff’s other arguments are irrelevant, it says.”
• “‘FaceTec argues two main grounds for disqualification: prior work on certain patent applications, and prior work on non-patent matters,’ the motion states. ‘Neither ground requires disqualification because none of the work was substantially related to this case under California law. But FaceTec also waived its request by its unreasonable, prejudicial delay.'”

“Ala. Judge Won’t Recuse In Talc Fight Due To Law Firm Work” —

• “An Alabama federal judge will not recuse himself from a fight between two leading plaintiffs law firms in the multibillion-dollar litigation over Johnson & Johnson’s tainted talcum powder, saying Friday that his previous representation of Beasley Allen Law Firm won’t bias him against Smith Law Firm PLLC.”
• “In a six-page order, U.S. District Judge R. Austin Huffaker Jr. shot down Smith Law’s recusal request.”
• “It’s been more than five years since he represented Beasley Allen as a malpractice and disciplinary defense attorney at Rushton Stakely Johnston & Garrett PA, Judge Huffaker said, and he’s not especially close with anyone at the firm. He was appointed in 2019 by U.S. President Donald Trump.”
• “‘Beasley Allen was just one of numerous other law firms and attorneys that I represented over the years,’ Judge Huffaker said. ‘That representation was occasional over the course of the years and constituted a small fraction of my overall client base and revenue generations on a year-to-year basis.'”
• “Judge Huffaker’s ruling is the latest development in a bitter rift that’s opened between two former partners in the massive multidistrict litigation against J&J. Plaintiffs in the MDL claim they developed cancer from asbestos-tainted talcum powder.”
• “Beasley Allen sued Smith Law in Alabama federal court in September, claiming the firm has sold out its own clients for a quick payday by supporting a controversial $9 billion settlement offer by J&J in order to pay off ‘litigation funding loans perhaps as high as $240 million,’ according to its complaint. Beasley Allen is suing Smith Law for breach of contract, among other things.”
• “Smith Law hit back a few days later, suing Beasley Allen in Mississippi federal court for defamation over the ‘patently false’ accusations in its complaint.”
• “The two firms have been cooperating on the sprawling talcum litigation under a joint venture agreement since 2013, and together they represent roughly 11,000 plaintiffs. Both have been instrumental in driving the litigation forward over the years.”
• “J&J needs support from 75% of the roughly 100,000 individual talc claimants to move forward with the deal, and the pharmaceutical giant has reportedly been aggressively courting that support after two earlier proposed settlements withered on the vine.”
• “Beasley Allen, meanwhile, has been leading the opposition to the proposed settlement, claiming it still doesn’t provide enough compensation to claimants who allegedly contracted cancer from asbestos-tainted talcum powder. Beasley Allen and J&J have clashed repeatedly in court over the issue.”

“Judicial ethics complaints can’t be ignored in Maine” —

• “Maine’s Supreme Judicial Court finds itself with a thorny dilemma on its hands at the start of the new year. For the first time ever, one of its own members, Associate Justice Catherine Connors, has been recommended for discipline by the Committee on Judicial Conduct after failing to recuse herself for an important foreclosure case in which she cast the deciding vote.”
• “Though the issues surrounding recusal — opting out of case under consideration — are murky, leaving much to the discretion of the individual judge, the case itself is strikingly clear.”
• “Before joining the court in 2020 as Gov. Janet Mills’s first SJC nominee, Connors was a partner with Pierce Atwood, the Portland law firm. She argued and lost a case before the law court in 2017 that established a notably strict standard for how banks must present foreclosure documents.”
• “Basically, the court found that errors in such documents — such as misstating the amount owed the bank — invalidated the proceeding, essentially ending any need for repayment of the mortgage.”
• “That precedent was swept away in two foreclosure cases in 2024, including one – Finch v. U.S. Bank – where Connors was the deciding vote. This 4-3 decision relieved banks from the standards established in Pushard.”
• “Having argued the case that established the 2017 precedent, Connors checked with the Advisory Committee on Legal Ethics, which said she did not have to recuse because because she hadn’t represented either plaintiff.”
• “Still, recusal was the better option. During Connors’ confirmation hearing before the Legislature’s Judiciary Committee, responding to pointed questioning, she said she would ‘err on the side of recusal’ in foreclosure cases.”
• “Like most states, Maine ethics laws forbid not only a direct conflict of interest, but the ‘appearance’ of conflict.”
  “That’s what the Committee on Judicial Conduct determined. Given her foreclosure work for banks, it found, the public ‘would reasonably question her impartiality.'”
• “Asked by the SJC to recommend a specific sanction, it opted for a reprimand — the lightest punishment. Here we enter uncharted territory. Since it was formed as a judicial branch committee in 1978, Judicial Conduct has recommended discipline only 17 times, and never for a member of the SJC.”
• “As Maine’s highest court, the SJC now faces the uncomfortable task of potentially sanctioning one of its own members. To avoid this additional dilemma, some court observers suggest a panel of Superior Court trial judges be convened, or a group of out-of-state appeals court justices.”
• “There are pros and cons to any approach, and the decision will not be easy. Still, there is a legal process — very unlike the ethics crisis engulfing the nation’s highest court.”

“Proskauer Beats DQ Bid In NJ Hospital Antitrust Fight” —

• “A New Jersey federal judge refused to disqualify Proskauer Rose LLP from defending healthcare network RWJBarnabas Health Inc. in an antitrust lawsuit brought by competitor CarePoint Health Management Associates LLC, saying the present case wasn’t substantially related to work the law firm previously did for CarePoint.”
• “In a late November ruling unsealed Friday, U.S. Magistrate Judge Cathy L. Waldor wrote that CarePoint failed to establish that certain facts related to its prior representation by Proskauer were both relevant and material to its antitrust lawsuit against RWJBarnabas.”
• “She said that while CarePoint had suggested that the law firm had given it certain advice regarding related-party transactions, Proskauer had provided ‘foward-looking advice about whether the use of specific government funds for a small number of hypothetical transactions would pass muster under the relevant rules and regulations.'”
• “The only related party involved also appeared to be a hospital’s landlord, Judge Waldor wrote.”
• “One Proskauer attorney who was involved in CarePoint’s representation had described the firm’s involvement in a declaration, saying that Proskauer only provided advice concerning the permissibility of one hospital making rent payments to a related party and the implication of repaying a loan using COVID-19 relief funds.”
• “CarePoint sued RWJBarnabas in September 2022, accusing the New Jersey-based healthcare provider network of conspiring with others in a ‘years-long systematic effort’ to ‘destroy competition and to monopolize the provision of general acute care hospital services and related health care services’ in northern New Jersey.”
• “CarePoint, which recently filed for Chapter 11 bankruptcy, alleged that an ‘intertwined web of schemes’ had sought to ‘destroy’ three hospitals CarePoint operated as independent competitors to push CarePoint out of business through ‘serial acquisitions of competing hospitals and health care providers, as well as of the real estate necessary to operate competing hospitals.'”
• “In moving to disqualify Proskauer from representing RWJBarnabas, CarePoint asserted that the law firm had ‘open access to CarePoint’s confidential financial information and confidences.'”
• “‘By pursuing their strategy of blaming CarePoint’s founders, several of whom Proskauer apparently had attorney-client communications [with] … Proskauer has now caused this litigation to be substantially related to Proskauer’s prior representation of CarePoint,’ CarePoint said.”
• “RWJBarnabas, in response, snubbed CarePoint’s disqualification bid as a litigation tactic, ‘pure and simple.'”
• “In denying CarePoint’s disqualification motion, Judge Waldor also wrote that CarePoint was seemingly suggesting that Proskauer was extrapolating that CarePoint engaged in other related-party transactions.”
• “‘Stretched supposition is not fact, however,’ Judge Waldor wrote, adding that a ‘congruency of facts’ was needed to trigger a restriction on legal representation under a relevant Rule of Professional Conduct.”
• “‘In sum, the Court finds that Plaintiffs have not shown that this case is substantially related to Proskauer’s previous representation of CarePoint,’ Judge Waldor wrote. ‘Plaintiffs have therefore not met their ‘heavy’ burden of proving that Proskauer’s representation of Defendant runs afoul of [Rule of Professional Conduct] 1.9(a).’

“International Swimming League Sues Its Former Law Firm Over Negligence, Unfair Practices” —

• “The International Swimming League, which at this point has spent as much time in the courtroom as it ever did in a natatorium, is suing its former law firm for more than $7 million.”
• “The Zurch-based ISL and founder Konstantin Grigorishin sued the law firm Farella Braun + Martel in San Francisco Superior Court on December 30. The suit accuses the firm of professional negligence, breach of fiduciary duty, breach of implied contract, and unfair business practices in its anti-trust case against FINA (now World Aquatics)”
• Full complaint here.
• “The suit alleges that co-defendant Neil A. Goteiner, a partner in the firm, ‘persuaded ISL to hire Defendants…despite having little experience prosecuting antitrust actions.'”
• “That representing the three named athletes (Katinka Hosszu, Tom Shields, and Michael Andrew) in the anti-trust suit and the ISL in their suit represented a conflict of interest and they did not obtain ISL’s informed written consent to the joint representation.”
  “The matter of conflict of interest will prove peculiar to the general public, because ISL recruited the athletes to participate in their suit and instigated the legal proceedings against FINA.”
• “‘The potential conflicts between ISL and Grigorishin, ISL’s president and founder, included the fact that Defendants’ prior representation of Grigorishin provided Defendants with confidential information about Grigorishin and his finances that Defendants could leverage against Plaintiffs when ISL had liquidity issues impacting its ability to pay Defendants’ invoices.'”
  “‘The potential conflicts between ISL and the Swimmer Class Plaintiffs included the fact that both ISL and the Swimmer Class Plaintiffs were seeking economic damages from FINA (when FINA’s finances may have been insufficient to satisfy all clients’ claims) and likely would have to agree to any settlement and execution upon any judgment. Also, Defendants’ joint representation presented an obstacle to class certification (a fact that FINA raised in its opposition to the class certification in the Underlying Matter).'”
• “The suit is requesting that ISL and Grigorishin receive damages of $7.2 million, what they call the ‘full disgorgement of legal fees and costs…paid to defendants.'”

“Texas Firm Beats Arnold & Itkin DQ Bid In Hurricane Zeta MDL” —

• “A Texas state judge Thursday denied Arnold & Itkin LLP’s bid to disqualify the law firm defending a drilling rig owner in litigation stemming from Hurricane Zeta, finding that Arnold & Itkin hasn’t established that a defense lawyer who had worked for the firm was involved in anything substantially related to the current litigation.”
• “Harris County District Judge Rabeea Collier, in a brief order, denied Arnold & Itkin’s disqualification bid, which claimed that Karina Sanchez-Peralta of Ahmad Zavitsanos & Mensing, who represents Transocean Ltd., worked as a law clerk at Arnold & Itkin in 2022 and improperly sent herself confidential information about the Hurricane Zeta litigation before leaving the firm.”
• “The judge found that, while Sanchez-Peralta performed work for an Arnold & Itkin client who is now a medical expert for the hurricane litigation plaintiffs, Arnold & Itkin hasn’t established that the work Sanchez-Peralta was involved in is ‘substantially related to this litigation.'”
• “‘Additionally, plaintiffs have not demonstrated that they would suffer prejudice if disqualification were not granted,’ the judge said.”
• “The disqualification motion said that while Sanchez-Peralta was a clerk at Arnold & Itkin in 2022, the firm had for two years been representing plaintiffs in the multidistrict litigation created to handle seamen’s claims related to the hurricane. The crew members claim they were injured after Transocean forced their ship to remain in the path of the hurricane when it hit the Gulf of Mexico in October 2020.”
• “Ahmad Zavitsanos then ‘recruited’ Sanchez-Peralta before the end of her employment with Arnold & Itkin, the firm said, adding that she started there in September 2023 and became attorney of record for Transocean in the Hurricane Zeta MDL in March 2024.”
• “Sanchez-Peralta, who was chosen by her employer to serve as ‘lead attorney on all issues related to medical damages, witnesses and records,’ took work product from Arnold & Itkin related to the Hurricane Zeta MDL ‘in the final minutes’ of her employment, Arnold & Itkin argued.”
• “‘Then, according to her own LinkedIn profile, she took a job at AZA,’ the motion said. ‘Plaintiffs just discovered these violations and the conflict of interest after feeling compelled to investigate other potential ethical and professional violations based on Transocean and its counsel’s recent conduct in the media.'”
• “Arnold & Itkin was referring to news articles written by Texas Lawbook and Law360 that detail allegations Ahmad Zavitsanos has raised against Arnold & Itkin related to medical costs for Hurricane Zeta plaintiffs.”

“Summit: South Dakota regulator has conflict” —

• “The Iowa company proposing a carbon dioxide pipeline has formally requested that a South Dakota regulator recuse herself from the project’s permit application in that state because of an alleged conflict of interest — but the regulator said she does not have ‘a legal conflict.'”
• “In a letter sent last week, Summit Carbon Solutions asked South Dakota Public Utilities Commissioner Kristie Fiegen to disqualify herself. That would allow the governor to appoint another state official to fill in for Fiegen during the three-member commission’s consideration of Summit’s application.”
• “Summit wants to construct a $9 billion, five-state pipeline to capture and transport some of the carbon dioxide emitted by 57 ethanol plants to an underground storage area in North Dakota. The project would capitalize on federal tax credits incentivizing the prevention of heat-trapping carbon emissions into the atmosphere.”
• “The project has a storage permit in North Dakota and route permits in North Dakota, Iowa and Minnesota, while Nebraska has no state permitting process for CO2 pipelines. The project also faces litigation from opponents in multiple states.”
• “This is Summit’s second application in South Dakota, after the state’s Public Utilities Commission rejected the first application in 2023. Fiegen recused herself from those proceedings and was replaced then by State Treasurer Josh Haeder.”
• “At the time, Fiegen wrote a recusal letter saying she had a conflict because the pipeline ‘would cross land owned by my sister-in-law (my husband’s sister) and her husband.’ Fiegen also recused herself from an earlier, separate crude oil pipeline permit application for a similar reason.”
• “Fiegen has not recused herself from the new application, but Summit said the same conflict exists.”
• “‘As with your previous decisions,’ said the company’s new letter to Fiegen, ‘the facts and established South Dakota law support a decision that you should step aside.'”
• “Fiegen responded with a letter to Summit. In its entirety, Fiegen’s letter said, ‘I am an elected Public Utilities Commissioner and will carry out my duties as such. I do not have a legal conflict. I am sitting on the docket.'”
• “The Summit letter drew criticism from an attorney representing landowners opposed to the pipeline, Brian Jorde, of Domina Law Group in Omaha, who disputed the allegation that Fiegen has a conflict of interest.”
• “‘From my viewpoint she never had a conflict that rises to the level of recusal and certainly doesn’t now,’ Jorde wrote. ‘The isolated fact that she is related by marriage to a trustee of a trust that owns land that signed an easement with Summit is not a direct conflict.'”
• “Summit’s new letter said the logic that motivated Fiegen’s prior recusal remains unchanged. The company said her involvement risks violating South Dakota law, which the company said bars officials from participating in matters where conflicts exist.”
• “The letter said Fiegen’s failure to recuse herself could lead to litigation, an appeal of the commission’s eventual permit decision and delays in the permitting process.”
• “‘Because your family has a direct interest in the approval or denial of the permit, and because you previously recused yourself in two dockets based on the same facts, a court almost certainly would find it inappropriate for you to participate in this docket,’ the letter states.”